Even if you are someone that has a proper cash flow either through salary or from your own business, unexpected expenses can happen anytime. This is where a loan enters the picture and becomes your lifeline in times of need. Nowadays, taking a loan has become very easy and many people use it for their different necessities including buying a new car or house, medical bills, funding marriage expenses, or education. There are a lot of various loans available that you can take, depending on your specific needs such as personal loans, payday loans, home loan, and more.
However, one of the benefits of taking out a personal loan is that you can determine the amount you want to apply for and how long you want to do the repayment for it. If your application got accepted, you should be aware and be able to afford the repayments over the definite period. But in case you are wondering what’s going to happen if you fail to pay your loan on time, there are certain consequences if you do struggle to pay your debt.
Your Creditor Will Contact You
This is the first thing that you need to expect if you ever miss a payment. And sometimes, they would also send you a letter. They can also give you charges depending on the terms that you and your lender agreed upon. Don’t panic immediately if you missed a payment for the first time, just make sure that you will be able to cope up by making the payment as fast as you can, along with an additional charge. Your creditor will confirm assurance from you that you will be able to make all future payments on time, and if you can’t pay on time due to lack of a direct debit then they may demand one is set up.
Most of time, if you miss one payment but is able to repay within a few days, this won’t usually go into your credit report. But it’s important that you make it a habit to pay on time.
Damage on Your Credit Score
If you are two weeks late in paying your debt, then a notice will be put down on your credit report, and your credit score gets affected. At this time, you may have already received correspondence from your creditor and escalation letters, reminding you that your payment is overdue and your lender may have given you a clear and definite period to catch up prior taking greater action. They will give you time to pay for the late payment but it will still be recorded on your credit report.
Losing Your Belongings
In debt, this is probably the worst that could happen and you want to try your best to avoid it. You can lose your assets, depending on the type of loan you have applied for. For secured loans, such as a homeowner or logbook loan. Your lender can withdraw your possession and sell the security. If your security is your house, then chances are they will need a court order to do it. If you applied for unsecured loans, such as a personal loan, it is more difficult for the lender to force you to sell but they will bid for a charging order and obtain the loan added to your property toward the courts and this would be their last action. ]
Your Account Falls Into Default
Escalation and default will happen if you fail to make your payments on time, especially if your payment is 60 days late. Consider this as a significant financial situation that you need to be serious of. It can have a default on your credit file and further cause difficulties in securing your credit for plenty of years.
Expect numerous calls and reaching out from your creditor’s collection department, as they are just seeking what they are owed. They can request for a personal face to face meeting to discuss your account, but you have the right not to do so and just talk to them by telephone or in writing if you prefer. On your default notice, the details of the time in which you need to make the required repayments and schedule future payments ahead prior to the further escalation of the matter.
Escalate Your Account Through Courts
If the failure in repayment continues, your creditor may escalate your account through the courts in order to legally impose payment. If the court discovers in favor of the creditor, then you don’t have a choice but to repay. The judge will decide and may include fees and interest from the last repayment deadline. In this situation, either you will have a court writ on your credit file or the court can apply and declared you bankrupt.
Don’t Miss Out Your Payments!
Speak to your lender as soon as possible if you think you are facing financial problems and may result for you to have a difficult time to make repayments. Never see it as an intimidating step, they are already used to it and will even give you options and alternatives to help you.